Axelar

Charles Hoskinson

Since our industry was founded in 2009 and the <a href="https://bitcoinmagazine.com/culture/exploring-the-origin-of-bitcoin">few decades of intellectual cypherpunk discourse</a> that preceded it, there are more than <a href="https://triple-a.io/cryptocurrency-ownership-data/">420 million cryptocurrency users</a> worldwide, of which <a href="https://www.security.org/digital-security/cryptocurrency-annual-consumer-report/">93 million are from the United States</a>, with a collective value in the trillions of dollars. Including the internet, no technology has seen such remarkable sustained growth from a single protocol and user to these staggering numbers in a completely uncoordinated and decentralized manner in just 15 years.



Our collective success stems from a lack of trust in institutions, their leaders and globalization&#8217;s inequity. Simply put, the social contracts we inherited aren’t being honored. Since 1971, our money has been debased through decades of unending inflation that has hollowed out the middle class. The American dream of owning a home, starting a family and saving for retirement seems unattainable for so many millions now.



Ninety-three million Americans have chosen to explore the cryptocurrency industry because they have become accustomed to systems and products that evolve rapidly with technology and are designed to improve in quality over time, instead of governance structures that continue to fail us through stagnation.



It’s not good enough to demand elections to hire different politicians who renew and modernize our social contract. We must develop capabilities to ensure our social contract cannot be violated. We need high-integrity institutions with blockchain systems embedded within them.



Any politician who supports our industry should be rewarded with election or re-election. Those who oppose it should be fired. The rest of their policy doesn’t matter because the US can no longer govern.



Every problem of the modern age is bipartisan. Since Lincoln&#8217;s election, 100% of all US presidents have been Republicans or Democrats. The same is true for the legislative branch and the courts. Electing more Republicans and Democrats won’t somehow magically end the chaos they have caused.



Over <a href="https://news.gallup.com/poll/512135/support-third-political-party.aspx">63% of Americans</a> want a viable third-party option in elections. Yet, the <a href="https://www.prri.org/research/threats-to-american-democracy-ahead-of-an-unprecedented-presidential-election/">majority are unwilling to vote for a third party</a> due to the lesser evil concern. There is a bipartisan agreement (the monoparty concept) that ballot access and design can never change to permit viable third-party options. Once in power, the monoparty gives more money and control to a gargantuan Federal bureaucracy.



The point of cryptocurrencies is to opt out of this system by rebuilding our social contracts using protocols. Eventually, the majority of Americans will be within the new system, which will simply make the old one obsolete.&nbsp;



This belief brings me to the reason for writing this editorial. While both parties are generally incompetent and corrupt in their management of our affairs, there is a policy difference between Biden and others.&nbsp;



The Biden administration has engaged in an all-out war on the cryptocurrency industry for the past few years. From <a href="https://bitcoinmagazine.com/print/operation-choke-point-2-0-how-u-s-regulators-fight-bitcoin-with-financial-censorship-">Operation Chokepoint 2.0</a>, which systematically unbanked cryptocurrency companies, to the SEC committing itself to unprecedented regulatory capture and regulation through enforcement that has drawn the <a href="https://www.sec.gov/news/speech/peirce-remarks-association-private-enterprise-education-040824">criticism of its own leadership</a>, the current climate is of fear, persistent obfuscation, and a guilty-until-proven-innocent attitude.



The administration has also prevented meaningful legislative actions from moving forward. For example, the <a href="https://www.whitehouse.gov/wp-content/uploads/2024/05/SAP-HJRes109.pdf">recent veto threat</a> of legislation repealing SAB 121 demonstrates that any sensible action to provide clarity or rulemaking should be removed. Another example is the White House’s opposition to <a href="https://rules.house.gov/sites/republicans.rules118.house.gov/files/RCP_H4763_xml%20%28003%29.pdf">H.R. 4763</a>, which would dramatically enhance clarity in our industry and create hundreds of thousands of American jobs.



Furthermore, there is a systematic war on liquidity, DeFi and self-custody, where legitimate exchanges, wallet providers and dapps operating without compliance issues have received Wells Notices from the SEC:



<ul>
<li><a href="https://www.coinbase.com/blog/the-sec-has-told-us-it-wants-to-sue-us-over-lend-we-have-no-idea-why">Coinbase</a> received a Wells notice related to its proposed Lend program, which the SEC viewed as involving unregistered securities​.</li>



<li><a href="https://www.coindesk.com/policy/2024/04/10/defi-exchange-uniswap-receives-enforcement-notice-from-the-sec/">Uniswap</a> received a Wells notice concerning potential securities law violations​.</li>



<li><a href="https://www.coindesk.com/policy/2023/03/22/sec-warns-coinbase-its-pursuing-enforcement-action-over-securities-violations/">Coinbase</a> faced another Wells notice for operating as an unregistered securities exchange, broker and clearing agency.</li>



<li><a href="https://www.ccn.com/news/binance-gets-extra-time-sec-lawsuit/">Binance</a> received a Wells notice concerning its operations as an unregistered exchange​.</li>



<li><a href="https://www.wsj.com/articles/sec-targets-bittrex-fallen-giant-of-u-s-crypto-exchanges-4bd615b6">Bittrex</a> received a Wells notice for unregistered securities trading​​.</li>



<li><a href="https://www.sec.gov/news/press-release/2023-64">Beaxy</a> the exchange received a Wells notice, contributing to its eventual shutdown​.</li>



<li><a href="https://www.sec.gov/news/press-release/2023-237">Kraken</a> issued a Wells notice for issues related to unregistered securities​.</li>



<li><a href="https://www.reuters.com/business/finance/robinhood-crypto-gets-wells-notice-us-sec-2024-05-06/">Robinhood</a> received a Wells notice for operating an unregistered securities exchange​. </li>



<li><a href="https://consensys.io/crypto-regulations/defend-ethereum">Consensys</a> received a Wells notice from the SEC for its MetaMask product.</li>
</ul>



It&#8217;s worthwhile to focus on Coinbase. The SEC allowed the company to conduct a public offering and expose retail investors to the risk of its business model. It then declared that Coinbase was operating an illegal business nearly two years afterward, with the exact same facts and circumstances listed in the S1.&nbsp;



The Consensys case seems to stem from Ethereum being considered a security after previously being considered not a security. It also implies that non-custodial wallets are now under US regulatory capture.&nbsp;



Then, there are the words of the administration’s advisors. In the March 2023 issue of <a href="https://www.coindesk.com/policy/2023/03/21/white-house-takes-aim-at-crypto-in-scathing-economic-report/">The Economic Report of the President</a>, the authors <a href="https://www.whitehouse.gov/wp-content/uploads/2023/03/ERP-2023.pdf">issued</a> a scathing rebuke of our industry:



“It has been argued that crypto assets may provide other benefits, such as improving payment systems, increasing financial inclusion, and creating mechanisms for the distribution of intellectual property and financial value that bypass intermediaries that extract value from both the provider and recipient. Looking under the hood at these arguments, however, shows a more complicated picture. So far, crypto assets have brought none of these benefits.”



They predictably reference Terra, Bitconnect, and FTX as shining examples of the successes of the cryptocurrency industry.



Moving along, we have <a href="https://www.whitehouse.gov/nec/briefing-room/2023/01/27/the-administrations-roadmap-to-mitigate-cryptocurrencies-risks/">The Administration’s Roadmap to Mitigate Cryptocurrencies’ Risks</a>, which claims our industry is funding North Korea, needs more enforcement actions, facilitates money laundering, and isn’t FDIC insured!? So, I guess those <a href="https://reason.com/2023/08/14/caitlin-long-on-why-politics-should-stay-out-of-banking/">full reserve banks in Wyoming</a> are an inherent risk to the banking system because they have 108% of customer deposits on hand.



It’s a repeated pattern of claiming the industry is doing something wrong and needs to follow relevant regulations (come in and register), providing no meaningful path or clarity to do so, and then punishing the people who try to comply, like Coinbase. This behavior isn’t the well-intended ignorance of an out-of-touch regime. It’s a systematic effort to end the American cryptocurrency industry.&nbsp;



While I’m cynical that changing leadership in Washington will result in meaningful improvements in the state of America, it is clear that if we create a political cost to being anti-crypto, politicians will back off from over-regulating our industry. We don’t need saviors or some grand plan. We want the power to decide how our money, identity and property should work through voluntary math-based protocols.&nbsp;



In other words, we need time for the industry to grow unopposed. The majority of cryptocurrency users are under the age of 40, and the majority of the young are politically liberal in the United States. If this voting block throws out a president they would usually vote for, then no Democrat in 2028 will be anti-crypto. This translates to the time we need to finish the job and integrate the fruits of our labor into a new American government once the generations cycle out.&nbsp;&nbsp;



Endless propaganda will attempt to convince Americans that 2024 is existential and anyone but Biden will mean the death of America. Somehow, our institutions will collapse due to a single imperial presidency. An orange-colored tyrant will declare himself king and end the Constitution.&nbsp;



The reality is that we’ll witness the same politics we have endured since the beginning of the 21st century: gridlock, bickering, grandstanding and publicity stunts. Our institutions aren’t designed to assign power to a king. They are built to assign power and money to corporate masters who fund the revolving door of the <a href="https://www.youtube.com/watch?v=mw2z9lV3W1g">bureaucratic branch of the US government</a>.&nbsp;&nbsp;



Our votes and voices only matter if we use them with focus and intent. If we vote for pro-crypto candidates in 2024, America will eventually heal itself. If we vote against them, then we won’t.&nbsp;



Make your voice count. Vote crypto.



<hr class="wp-block-separator has-alpha-channel-opacity"/>


<div class="wp-block-post-author-biography">Charles Hoskinson is a Colorado-based technology entrepreneur and mathematician. He attended Metropolitan State University of Denver and University of Colorado Boulder to study analytic number theory before moving into cryptography through industry exposure.

His professional experience includes founding three cryptocurrency-related start-ups – Invictus Innovations, Ethereum and IOHK – and he has held a variety of posts in both the public and private sectors. He was the founding chairman of the Bitcoin Foundation’s education committee and established the Cryptocurrency Research Group in 2013.

His current projects focus on educating people about cryptocurrency, being an evangelist for decentralization and making cryptographic tools easier to use for the mainstream. This includes leading the research, design and development of Cardano, a third-generation cryptocurrency that launched in September 2017.</div>


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Why crypto matters: Foundations of a free and prosperous society

Molly Jane Zuckerman

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="256" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=1024&amp;h=1024" alt="" class="wp-image-60166" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=80 80w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>



Unlike books on Sam Bankman-Fried, there aren’t too many out yet on the story of NFTs.&nbsp;



This week’s release of Token Supremacy: The Art of Finance, the Finance of Art, and the Great Crypto Crash of 2022 by New York Times culture reporter Zachary Small, changes that.



And while his treatise on NFTs and the wider art market can at times feel like a bit more in-depth of a history than the average crypto degen would digest, anyone who has a genuine interest in modern-day digital art will learn something new from this story. Like, for instance, the weirdly high number of NFT creators who have filmed themselves setting priceless, physical pieces of artwork (<a href="https://blockworks.co/news/crypto-marketing-pr-circus">or themselves</a>) on fire for the imagined clout.



Small comes to the NFT space with a background in reporting on the traditional art world, which is an important and often rare perspective to have in the NFT space. As someone who has little understanding of how non-NFT art is bought and sold myself, Small’s book had me constantly surprised both by how similar the NFT art market is to what came before, and also how different.&nbsp;



One example —&nbsp;we all remember the first NFT insider trading criminal case, where former OpenSea manager Nate Chastain <a href="https://blockworks.co/news/opensea-prison-nathaniel-chastain">was sentenced</a> to three months in prison for buying NFTs ahead of their appearance on OpenSea’s homepage. But as Small writes in the book, it’s common practice for art dealers in the traditional art world to purchase paintings from artists when they know the artists will soon have major exhibitions. The OpenSea case then, Small continues, “was a clear indication that, within the industry, collectors viewed NFTs as being much closer to securities than to art.”



Read more from our opinion section: <a href="https://blockworks.co/news/oracle-thriller-novel-smart-contract">How a smart contract gets away with murder: A review of ‘The Oracle’</a>



But what I found most compelling in Small’s telling of digital art history is how <a href="https://blockworks.co/tag/nfts">NFTs</a> are far less revolutionary as an art form than I had believed. I am tickled by the idea that NFT artists are constantly recreating art movements of the past, either knowingly or subconsciously.&nbsp;



Take a quotation from pop art sculptor Claes Oldenburg, who wrote in 1961:&nbsp;



“I am for an art that embroils itself within the everyday crap and still comes out on top. I am for an art that imitates the human, that is comic, if necessary, or violent, if necessary.”



Small then writes of Mike Winkelmann, the artist known as Beeple whom he extensively interviewed for this book: “Winkelmann said much the same thing during my studio visit. And if he were a better art-history student, I might have accused him of ripping a page from Oldenburg’s notebook.”



Or, take this small anecdote about digital artists before blockchain was invented, who had to use physical CDs to store their individual artworks.



Small writes that these “artists were reluctant to upgrade or replace discs that collectors had accidentally snapped or scratched. If the discs were so easily replaceable, this would imply that the artworks they contained were also replaceable. And if they were replaceable, then they were not a unique or valuable commodity.”&nbsp;



Sound familiar?



If you are genuinely interested in NFTs, you’ll learn more about the artists that laid the foundation for NFTs to either successfully enter the space (or not) — as long as you can get past the prerequisite comparison of crypto to the Dutch tulip bubbles that intros the book.



If you are genuinely opposed to NFTs as an art form and all that they stand for, Token Supremacy will give you some evidence-based ammunition to debate NFT degens the next time they wax poetic about the future of digital art.



Take your pick.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



I don’t care much about tech, I don’t care a whole lot about finance, either. I care about writing stories and watching weird things unfold. And that’s why I’ve ended up in crypto. But because I’m missing that passion for what crypto and blockchain are all about — finance, tech, privacy, yadda yadda — I’m going to write instead about what I am actually interested in. Everything about crypto that has very little to do with crypto. That’s what this column will be about. All the tangential stories that come out of the blockchain and crypto space, what I think about them, and how I navigate it all as a skeptical former Russian literature major. It’s precisely my perch as an outsider that lets me do what I do: Opine on all sides of any crypto issue, no strings attached, no skin in the game. If you want to talk crypto with me, let’s go off topic.



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The history of NFTs you didn’t know you needed: A review of ‘Token Supremacy’

Macauley Peterson

Ethereum’s modular scaling roadmap has clear benefits in faster and cheaper transactions, using technology like rollups for execution and dedicated data availability providers.



In practice today, however, this comes at the steep cost of fragmentation in user experience.&nbsp;



This fragmentation is particularly evident on chains that are either too new or too small to have dedicated connections to crypto exchanges or other onramps. Moving funds first to, say, Arbitrum and then to <a href="https://blockworks.co/news/layer-2-adopts-celestia-mainnet">Manta Pacific requires the use</a> of a bridge like Rhino.Fi, which aside from additional steps, introduces a requirement to trust a new central counterparty, if only briefly.



The other alternative is to use native bridges back to <a href="https://blockworks.co/tag/ethereum">Ethereum</a> mainnet, which can be slow and costly.



So, while it is now easy to deploy new chains, tapping into the users and liquidity elsewhere — chiefly Ethereum mainnet and other major <a href="https://blockworks.co/tag/evm">EVM</a>-chains — remains a source of friction and risk.



But it won’t always be so.



Celestia’s Rollkit was the first sovereign rollup framework to radically simplify the launch of new chains using Celestia for DA. That’s for a <a href="https://l2beat.com/scaling/summary">category</a> of <a href="https://blockworks.co/tag/rollups">rollups</a> known as optimiums or validiums — optimistic or validity proof-based rollups that use offchain DA.



Read more: <a href="https://blockworks.co/news/layer-2-secured-by-ethereum">So your layer-2 is ‘secured by Ethereum’ — what does that mean?</a>



However, you can also build a chain directly on Celestia, which presents additional challenges, according to <a href="https://blockworks.co/tag/axelar">Axelar</a> co-founder Georgios Vlachos.



“If you&#8217;re building directly on Celestia, then it&#8217;s impossible for a user to even onboard from Ethereum,” Vlachos told Blockworks. “Axelar will allow users to move their assets to the chain — a boring use case, but it&#8217;s impossible to use the chain without functionality like this.”



Rollkit is about to get a boost from Axelar’s Interchain Amplifier, which automates token routing across all Axelar-connected chains — more than 60 and growing.



Axelar is not the only solution for cross-chain interoperability, but compared to many bridges, it’s more secure due to its decentralization with a permissionless validator set of 75 operators.



Individual cryptographic private keys are frequently compromised, resulting in millions of dollars in losses, including many incidents involving <a href="https://blockworks.co/tag/bridges">bridges</a>. In Axelar’s case, “it&#8217;s very hard for an attacker to actually steal funds because they would have to steal a majority of the [75] keys,” Vlachos said.



Its hub-and-spoke architecture is a boon for new chains spun up using Rollkit because they will immediately be connected to all other chains in the network. That’s possible because Axelar is itself a smart contract blockchain with its own virtual machine.



A new chain will typically lack native assets, so accessing <a href="https://blockworks.co/tag/liquidity">liquidity</a>, including stablecoins, from elsewhere is critically important.



“Circle doesn&#8217;t launch on a new chain day one,” Vlachos noted. “They have something like 10 chains today, but new rollups will need stablecoins [on] day one.”



USDC is natively issued on 16 chains, but only eight of those have available routes <a href="https://blockworks.co/news/circle-launches-cctp-solana">via its CCTP mint and burn system</a>.



On the asset issuance side, Axelar’s Interchain Amplifier will also support its Interchain Token Service (ITS), a cross-chain application built on top of the Amplifier layer that lets anyone create a cross-chain version of any token connected to Axelar.



Read more: <a href="https://blockworks.co/news/axelar-multichain-tokens">Tokens are going multichain, and it’s getting easier</a>



“As an industry, we need to standardize some of those things,” Vlachos added. “Unfortunately, every chain ends up doing their own thing.”



That shortcoming extends to <a href="https://blockworks.co/tag/wallets">wallet</a> providers, which have thus far tended to specialize within a certain ecosystem. He points to XDEFI as a multichain wallet example. <a href="https://blockworks.co/tag/phantom">Phantom</a>, which started on Solana, is another wallet that has lately been making a push to support other ecosystems.



“Axelar provides the technology to abstract away the chains, but we need the wallet developers to integrate the technology in the long run and make the same wallet available on many different chains,” Vlachos said.



<a href="https://blockworks.co/tag/lido">Lido</a> has made progress in terms of token standardization, working with both Axelar and Wormhole to establish a canonical version of stETH across many chains.



Vlachos is keeping his eye on the prize: a future in which users can focus on applications and assets, not on the backend wizardry facilitating their desired action.



“The idea is that any application that today is siloed on a single chain — be it decentralized exchange, a money market, an NFT marketplace — a developer should be able to build the same user experiences spanning different chains.”



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Celestia’s Rollkit gets an interchain boost

Casey Wagner

An eleventh-hour about-face from two Bloomberg exchange-traded fund analysts about the likelihood of the Securities and Exchange Commission approving a spot ether ETF sent crypto prices soaring Tuesday.&nbsp;



Ether (<a href="https://blockworks.co/price/eth">ETH</a>) is up more than 23% since Monday, according to data from Coinbase. The cryptocurrency is currently trading at just under $3,800, almost $1,000 higher than it was just seven days ago.&nbsp;



Read more: <a href="https://blockworks.co/news/sec-ether-etf-decision-soon">Spot ether ETF decision week just got a bit more interesting</a>



Bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) is also on the rise this week, up close to 16% in the past seven days. The largest cryptocurrency broke $70,000 Monday, per Coinbase, for the first time in about a month.&nbsp;



The rally comes as Bloomberg analysts Eric Balchunas and James Seyffart — who have elevated to somewhat of a celebrity status on so-called Crypto Twitter in recent months — <a href="https://x.com/EricBalchunas/status/1792636523050906102">announced</a> on Tuesday afternoon that they were upping their projections of spot ether ETF approval from 25% to 75%.&nbsp;



A person familiar with the matter told Blockworks Tuesday that “conversations [with the SEC] are progressing.” The SEC has apparently instructed issuers to update their 19b-4 filings, a sign that approval <a href="https://blockworks.co/news/empire-newsletter-sec-about-face-fires-up-eth-etf-hype-loop">may be granted after all</a>. The person was granted anonymity given the sensitivity of the discussions.&nbsp;



“This does not mean approval is a given, but it would be really weird for the <a href="https://blockworks.co/tag/sec">SEC</a> to incur the extra time and admin cost if it is planning to reject,” Noelle Acheson, author of the Crypto is Macro Now newsletter, said.&nbsp;



The SEC faces deadlines to approve or deny <a href="https://blockworks.co/tag/ether-etfs">spot ether ETF</a> applications this week on Thursday and Friday. An SEC spokesperson declined to comment.



&#8220;Crypto markets soared Monday on signs that US regulators may approve spot ethereum ETFs,” Zach Pandl, managing director of research at Grayscale, which currently has an ETH ETH application in with the SEC, said. “The <a href="https://blockworks.co/news/bitcoin-etf-inflows-highest-since-march">success of bitcoin ETFs</a> has already demonstrated the popularity of these products with investors, but the impact of a potential approval extends beyond creating a new source of demand.”



Also this week, investors will be watching a slew of Federal Reserve speakers Tuesday and awaiting minutes from the central bank’s most recent Federal Open Market Committee meeting to drop on Wednesday.&nbsp;



Odds of&nbsp; central bankers holding interest rates steady in June remain at 96%, according to CME’s <a href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?redirect=/trading/interest-rates/countdown-to-fomc.html">FedWatch</a> Tool.&nbsp;



US equities were fairly flat early in Tuesday’s trading session with the S&amp;P 500 gaining about 0.01% and the Nasdaq Composite dipping 0.2% an hour after the open.



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Ether, bitcoin rally on renewed ETH ETF optimism 

Katherine Ross

David Canellis

<h2 class="wp-block-heading">ETFs with a side of chaos</h2>



Looks like Gary Gensler’s SEC isn’t so anti-ETH ETF after all.&nbsp;



Let’s start with the most recent news. Early this morning, Fidelity filed an amendment to its S-1 — the registration statement that the SEC will have to approve to launch the fund — and removed the staking language.&nbsp;



This isn’t a huge surprise, because when the tide suddenly turned late Monday and reports began to circulate that the SEC was suddenly engaging with the issuers, one of the first expected changes was staking.



It’s not currently clear what else the regulator will ask the issuers to adjust, though The Block <a href="https://www.theblock.co/post/295600/sec-only-wanted-relatively-light-updates-to-19b-4-forms-for-ethereum-etfs-source">reported</a> that issuers were asked for “light” changes. The new documents will be filed with the SEC this morning.&nbsp;



The SEC told us that they don’t comment on individual filings when asked about the ETH ETF proposals.&nbsp;



If you somehow missed the commotion late Monday and have no idea what I’m talking about, let’s recap.&nbsp;



Yesterday afternoon, Bloomberg analyst Eric Balchunas took to X to <a href="https://x.com/EricBalchunas/status/1792636523050906102">say</a> that they were raising their ETH ETF approval odds to 75% from 25%.&nbsp;



Media reports — including one from <a href="https://blockworks.co/news/sec-ether-etf-decision-soon">Blockworks</a> — trickled in, confirming that issuers were beginning to hear from the SEC. The lack of engagement from the regulator in the first place was one of the <a href="https://blockworks.co/news/sec-decision-ether-etf-possibilities">driving forces</a> for the pessimism around a May decision.&nbsp;



This morning’s filings from potential issuers are the real confirmation, though. The SEC is here, and they’re feeling chatty. Issuers are on a tight deadline; the SEC has to approve documents by Thursday night if they’re going this route.&nbsp;



But this isn’t going to look like the <a href="https://blockworks.co/news/sec-approves-bitcoin-etf">bitcoin ETFs</a> (though even that process was unique in its own ways). The most likely scenario here, I’m told, is that the SEC approves the issuer’s 19b-4 filings. Those filings inform the SEC of a proposed rule change, and they’re one of a few necessary documents for the SEC to approve.&nbsp;



All that is to say, this doesn’t mean that the ETH ETFs are launching this week.&nbsp;



The SEC will still need to approve the issuer’s S-1s, or registration statements, before the funds are cleared to launch. This is where things get tricky. The ETF Store President Nate Geraci <a href="https://x.com/NateGeraci/status/1792330334169903568">said</a> it’s possible for the regulator to approve the 19b-4’s then slowly move forward with the S-1 approvals. Then we’ll see the funds launch.



While the process for the SEC is clear, the water’s still muddy because it’s unclear if the SEC had a sudden change of heart or if they planned to approve the ETFs all along.&nbsp;



Geraci told me he thinks this was the regulator’s plan, but the change seemed to shock both Balchunas and his colleague James Seyffart.



One thing’s for sure, though — this is a pretty unusual route to approval.&nbsp;



“I’ve never seen anything like this honestly. Based on the people I’ve spoken to, no one was ready or expecting this. Kinda tells me that this was a decision from above and may have been a political decision,” Seyffart told me.&nbsp;



Van Buren Capital’s Scott Johnsson agreed with Seyffart, adding that the SEC “has a long history of simply denying crypto applications without any comment, as we had witnessed with BTC spot products until this year&#8217;s final approval.”



“To reach out to multiple issuers (including those without upcoming deadline) to request amendments on an expedited basis is indicative of a last minute course change,” Johnsson said.



Whether political or planned, this week just got way less boring.&nbsp;



— Katherine Ross



<h2 class="wp-block-heading">Data Center</h2>



<ul>
<li>Bitcoin is still <a href="https://www.tradingview.com/chart/?symbol=BITSTAMP%3ABTCUSD">trading</a> above $71,000 after surging to a local high of $71,958 overnight. </li>



<li>Meanwhile, ether is <a href="https://www.tradingview.com/chart/?symbol=BITSTAMP%3AETHUSD">trading</a> above $3,700, retaining Monday’s post-SEC rumor gains. </li>



<li>Yesterday’s market move added more than 8% to crypto’s collective market capitalization, per <a href="https://www.coingecko.com/">CoinGecko</a>. </li>



<li>Ether futures open interest jumped to more than $15 billion over the past 24 hours, according to <a href="https://www.coinglass.com/currencies/ETH">CoinGlass</a> data. </li>



<li>Nearly $270 million worth of short positions were wiped out in the past day, per <a href="https://www.coinglass.com/LiquidationData">CoinGlass</a>. </li>
</ul>



<h2 class="wp-block-heading">A game of narratives</h2>



The AI pitch isn’t all too dissimilar from even the purest of crypto bull cases —&nbsp;which makes them great bedfellows.



Bitcoin uses the promise of valuable crypto to secure an uncensorable digital money network. Ethereum offers yield to encourage powering a world computer that can never be stopped.



The AI crypto bull case is still crystalizing, but token incentives are similarly set to be at the heart of it.&nbsp;



It’s not so much “LLMs on the blockchain,” but rather, most of crypto’s biggest AI projects are, essentially, cloud computing marketplaces integrated with some element of tokenomics.&nbsp;



For example: spend crypto to hire GPUs to run and train models and, hopefully, decentralize the broader ecosystem along the way. Or, earn crypto by providing computing services to an ad-hoc cloud marketplace.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/k01RdYtgz5tvoF5aFmXopGvIHHZHOfbiTd-6y7zXMGnfVUmZcl-JENv7kH4hyfCQQpBboM5xkcc_9w1eA1Q82XRJRAuLhBedL2rAb0km5RH_4KNncriFe6s5HUb2juONcFI1UNUcvian-jV0CLDqHz8" alt=""/><figcaption class="wp-element-caption">Crypto AI projects caught fire around the time of ChatGPT’s launch last March</figcaption></figure>



Other non-marketplace projects are emerging, while existing crypto projects are AI elements to their primary offerings. But politics is where <a href="https://blockworks.co/tag/artificial-intelligence">AI</a> and crypto’s narratives are truly converging.&nbsp;



While there had been rumblings about the censored nature of closed-source LLMs like OpenAI’s ChatGPT, Google’s “woke” Nazi imagery <a href="https://www.theverge.com/2024/2/21/24079371/google-ai-gemini-generative-inaccurate-historical">blunder</a> made it clear: as powerful as AI is, it’s not immune to human biases, and it may even amplify those of their creators.&nbsp;



The dramatic temporary ousting of Sam Altman from OpenAI last November meanwhile exposed the AI sector&#8217;s problem with centralization, as was discussed on today’s Empire <a href="https://blockworks.co/podcast/empire/9595b806-16dc-11ef-b04e-e3b02f33ea22">podcast</a>.&nbsp;



After all, if OpenAI went away tomorrow, what would become of the hundreds (or even thousands) of startups relying on its APIs for their primary products?



<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/KIVK23Q_5rlzUS-XVoBhHsT2Tpe7ZppqtgJv8MWDTBO1qHjEdylgsjEoZbHIOh96VNdpnjTnP7nQ2JmmkKGDS-ZcLK0J6oViSghjI4azbnojKMkaQCiwWiHhgeMZzbj-YPZ903LL9GUPWvbiwagatrE" alt=""/><figcaption class="wp-element-caption"> Internet Computer and NEAR Protocol quickly launched AI initiatives in the months after the launch of ChatGPT</figcaption></figure>



Suddenly, AI crypto had an extremely clear ideological value proposition, even if it boils down to simply “add a token.”&nbsp;



Token incentives must drive the proliferation of open source alternatives to ChatGPT and Google Gemini (formerly Bard).&nbsp;



It’s a freedom of speech thing, for better or worse, similar to the Bitcoin maxis who say the only vote that matters leading into November is to pull your fiat money out of the bank and store it in bitcoin instead.



Or else, the world be stuck with watered down, corporate-controlled, heavily-censored AI chatbots, rather than based digital waifus.&nbsp;



And we can’t have that.



— David Canellis



<h2 class="wp-block-heading">The Works</h2>



<ul>
<li>Congress will <a href="https://www.coingecko.com/">begin voting</a> on a crypto market structure bill Wednesday, according to Blockworks’ Casey Wagner. </li>



<li>House Democrat leaders oppose the measure but <a href="https://x.com/Eleanor_Mueller/status/1792701481575170341">won’t try to compel</a> members to vote for or against it, according to Politico.  </li>



<li>Blockchain gaming project Gala Games says it <a href="https://x.com/Benefactor0101/status/1792698768166715776">suffered an exploit</a> late, Monday, resulting in an illicit sale of tokens worth $21 million. </li>



<li>Coinbase and Kraken are among the crypto-focused members of a <a href="https://www.prnewswire.com/news-releases/tech-companies-announce-a-new-coalition-to-fight-online-fraud--pig-butchering-scams-302149506.html">new working group</a> focused on combating romance scams and other types of online financial fraud. </li>



<li>As much as $2 billion will be collected for a <a href="https://blockworks.co/news/genesis-settlement-pay-creditors-2b">victim’s fund</a> following a settlement between New York’s Attorney General and bankrupt crypto lender Genesis. </li>
</ul>



<h2 class="wp-block-heading">The Morning Riff</h2>



<a href="https://blockworks.co/tag/grayscale">Grayscale</a> suddenly announced Monday that CEO Michael Sonnenshein <a href="https://blockworks.co/news/grayscale-michael-sonnenshein-stepping-down">was out</a> (to pursue other endeavors) and Peter Mintzberg’s in (starting in August).&nbsp;



Katherine Ross: The new CEO is a TradFi veteran with an impressive resume. He’s had stints at BlackRock, OppenheimerFunds, Invesco, Apollo and Goldman Sachs.&nbsp;



Mintzberg’s an interesting hire for Grayscale, and one with such a vast body of experience that it’s hard to read the tea leaves here. He’s got experience with mergers from his time at OppenheimerFunds and Invesco, but he was also one of the top dogs at Goldman’s asset management business.&nbsp;



If I were a betting woman, based on the sudden withdrawal of the ETH futures ETF filing and the outflows we’ve seen from Grayscale’s bitcoin ETF, I’d probably lean toward Mintzberg being brought in to right the ship. Sonnenshein’s tenure is a storied one, but money talks. At the end of the day, they might be reconsidering how to approach the ETFs, especially if an ETH ETF is on the horizon.



David Canellis: The CEO shakeup at Grayscale formally closes the loop on a major Bitcoin storyline: the GBTC “widowmaker trade.”



GBTC, launched in 2013, was one of the first crypto-infused traditional finance products, and by the 2021 bull market’s peak had attracted nearly $44 billion in bitcoin under management.&nbsp;



It’s long been speculated that the bulk of GBTC’s inflows were tied to accredited investors seeking a risky arbitrage trade: GBTC had always traded at a premium to the bitcoin it held, which meant there was opportunity to profit by sending bitcoin to Grayscale in return for GBTC shares, to be sold after a six-month window had expired.



Except…GBTC’s premium to its NAV blew up in November 2021, leading to cascading credit <a href="https://www.swanbitcoin.com/gbtc-credit-contagion-part-ii/">contagion</a> across crypto lenders including Genesis, with failed hedge fund firm Three Arrows Capital also <a href="https://www.bloomberg.com/news/features/2022-07-13/how-crypto-hedge-fund-three-arrows-capital-fell-apart-3ac">suffering</a>.&nbsp;



Mintzberg may do well to avoid enabling any similar shenanigans moving forward.



— Katherine Ross and David Canellis



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Empire Newsletter: SEC about-face fires up ETH ETF hype-loop

As the price of ether increases, the cost of running a full solo staking node —&nbsp;with 32 ETH now worth $115,000 —&nbsp;moves further out of reach for all but the most hard core hobbyists.



One of the social goals that Oisin Kyne and Collin Myers, founders of Obol Network, care about most is enabling people that don&#8217;t have that kind of capital to participate in Ethereum consensus.



The pair looks forward to the day when the number of entities and locations validating the network will rise tenfold from its current crop of single-digit thousands of operators.&nbsp;



That includes a fellow in a Kenyan village who, according to Kyne, participates in a distributed validator cluster via <a href="https://blockworks.co/news/etherfi-airdrops-210m-token">EtherFi</a>, running his hardware off a Starlink and a generator.



“It certainly feels good to have people that are staking — that have the technical ability and are really into it, but either weren&#8217;t in early or don&#8217;t have, you know, bags — that can actually decentralize Ethereum and quite happily do it from the middle of nowhere,” Kyne told Blockworks.



Obol has spent the past few years proving out the technology to decentralize projects like <a href="https://blockworks.co/tag/lido">Lido</a>, its launch partner, and to enable more solo stakers as well as new paradigms like <a href="https://community.obol.tech/tag/Squad-Staking">squad staking</a>.



“We worked with [Lido] to integrate the technology into their stack, and now we&#8217;re progressively opening the code base, decentralizing the community, and in the future plan to incentivize the community and bring everyone together around this contribution based mindset,” Myers told Blockworks.



As a first step, Obol has announced the “1% For Decentralisation” funding model for the DVT middleware provider.



Under the plan, Obol’s distributed validator (DV) clusters will contribute 1% of their staking rewards “toward projects that add value and impact at the Ethereum consensus layer, including technology partners, researchers, community educators, node operators, and more,” according to a blog <a href="https://blog.obol.tech/1-percent-for-decentralisation/">post</a> published Tuesday.



The initiative piggybacks off the <a href="https://twitter.com/owocki/status/1745845124913914028">EasyRetroPGF</a> — or Retroactive Public Goods Funding — system pioneered by <a href="https://blockworks.co/tag/gitcoin">GitCoin</a>.



Whereas public good funding from the Optimism Foundation focuses on the execution layer and user adoption, “there needs to be a more concerted focus around the validator, infrastructure area, the consensus integrity, that whole side of the network,” the Obol founders say.



Middleware provides an interface between Ethereum’s consensus layer and software further up the modular stack.



“The creation of middleware enables add-on use cases to your existing experience,” Myers explained. “Without middleware, it&#8217;s just a boring old validator — you can&#8217;t do anything.”



<a href="https://blockworks.co/news/mev-the-relays-problem">MEV Boost</a> is one example in wide use alongside Obol today, that enables the little guy to earn similar staking yields as large professional operators. And soon validators will be able to participate in <a href="https://blockworks.co/tag/eigenlayer">EigenLayer</a> Actively Validated Services (AVS) or similar offerings on top.



“All of this is an extension of the validator as a world-class citizen of Web3,” Myers said.



<figure class="wp-block-image"><img loading="lazy" decoding="async" width="1324" height="590" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/05/image-4.png" alt="" class="wp-image-86237" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/05/image-4.png?w=1324 1324w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/image-4.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/image-4.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/image-4.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/image-4.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/image-4.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/image-4.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2024/05/image-4.png?w=80 80w" sizes="(max-width: 1324px) 100vw, 1324px" /></figure>



Ethereum is sometimes criticized for the complexity of its design, or for tolerating centralizing influences in certain areas, such as block building and the scaling of the execution layer.



But Myers feels those attacks are misplaced.



“From where I sit, two years ago we went from bad rent extraction, client centralization, a completely monolithic software stack, and now we&#8217;ve moved to modular, a bit more decentralized, open source, multiple options, lots of funding, good debate — and for me that&#8217;s progress,” he said.



While there is some movement in the direction of ossifying the base consensus layer, he pushes back against the notion that the roadmap is decreasing innovation at layer one. Rather, “they are just enabling it to exist elsewhere through decentralization…and DVT is a living example of that,” he said.



The “stage” <a href="https://l2beat.com/scaling/summary">framework</a> used by L2beat is a useful gauge of decentralization progress, and Osin agreed with Vitalik’s commitment to push “layer-2s” as such to reach the Stage 1 level by the end of the year.



“It’s an interesting social showing, of people being like, ‘no, we&#8217;re not going to tolerate a sidechain masquerading as an L2, unless you can permissionlessly exit back to L1,” Osin said.



Lido is backing the new Obol funding approach, with contributor Will Shannon, calling it “a fantastic approach to strengthening the resilience and decentralization of the Ethereum protocol.”



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Obol Network to fund ‘sustainable’ Ethereum development

Ben Strack

It’s spot ether ETF decision week — a pre-Memorial Day celebration of sorts for a certain segment of the crypto and financial communities.



Or a letdown.&nbsp;



The lead-up to the ruling didn’t seem to carry the same buzz as the Securities and Exchange Commission’s verdict on BTC funds in January.&nbsp;



That perhaps changed a bit Monday.



After weeks of industry watchers expressing doubts that the SEC was ready to approve such funds, Bloomberg analysts changed their SEC approval odds from 25% to 75%.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Update: <a href="https://twitter.com/JSeyff?ref_src=twsrc%5Etfw">@JSeyff</a> and I are increasing our odds of spot Ether ETF approval to 75% (up from 25%), hearing chatter this afternoon that SEC could be doing a 180 on this (increasingly political issue), so now everyone scrambling (like us everyone else assumed they&#39;d be denied). See… <a href="https://t.co/gcxgYHz3om">https://t.co/gcxgYHz3om</a>&mdash; Eric Balchunas (@EricBalchunas) <a href="https://twitter.com/EricBalchunas/status/1792636523050906102?ref_src=twsrc%5Etfw">May 20, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Ether rose above $3,500 just before 5 pm ET Monday — up about 14% on the day.



A person familiar with the spot ether ETF applications told Blockworks that “conversations are progressing.” They were granted anonymity given the sensitivity of the discussions.&nbsp;



An SEC spokesperson declined to comment.



The Bloomberg analysts alluded to a potential regulatory change of stance given how crypto has appeared to become more of a political issue in recent days and weeks.&nbsp;&nbsp;



Donald Trump has essentially promised to be a pro-crypto president if returned to the White House in the upcoming election. Then, <a href="https://blockworks.co/news/senate-passes-resolution-to-overturn-sab121">12 Democratic senators joined Republicans last week to pass a resolution</a> to overturn the SEC’s Staff Accounting Bulletin (SAB) 121. The move could signal that more Democrats look to gain favor with pro-crypto voters the way Republicans historically have.&nbsp;&nbsp;



Still, industry watchers have named several reasons they think the SEC might not be ready to allow spot ether ETFs to start trading.&nbsp;



“Concerns over the liquidity of ETH&#8217;s spot and futures markets, along with its previous classification as a security by the SEC, contribute to skepticism about swift approval,” Fineqia International analyst Matteo Greco said in a Monday research note. 



Read more: <a href="https://blockworks.co/news/sec-decision-ether-etf-possibilities">Why the SEC could choose to deny ether ETFs, and what could happen next</a>



Others have pointed out the lack of SEC engagement with prospective issuers over the last weeks and months — a divergence from the many meetings the regulator had with fund firms ahead of the bitcoin ETF approvals.&nbsp;&nbsp;



21Shares President Ophelia Snyder had <a href="https://blockworks.co/news/21shares-ark-invest-ether-etf-approval">previously countered that point</a>, noting there was “less to look at” this time around given “how fresh most of the documentation is” following the bitcoin ETF approvals.



As the agency did with spot bitcoin ETFs, the SEC would have to approve the 19b-4 documents submitted by the stock exchanges on which these products would trade, as well as S-1 registration statements from the issuers.



The SEC is asking exchanges to update their 19b-4 documents “on an accelerated basis,” CoinDesk <a href="https://www.coindesk.com/policy/2024/05/20/ether-etfs-filing-process-sees-abrupt-progress-though-approval-not-guaranteed-sources/">reported</a> Monday, citing unnamed sources.



Nate Geraci, president of the ETF Store, <a href="https://x.com/NateGeraci/status/1792330334169903568">said</a> in an X post that the SEC could theoretically approve the 19b-4s and wait on greenlighting the S-1s as more engagement with issuers takes place.&nbsp;



“This decision could be favorable for issuers, as traditional finance investors seem [to remain] strongly focused on BTC, potentially reducing market activity around ETH spot ETFs if launched next week,” Greco said in his research note.



Should the SEC reject the spot ether funds, issuers would need to re-submit their filings, restarting a 240-day clock. This could potentially lead to approval in this year’s fourth quarter, or in early 2025, Greco noted.&nbsp;&nbsp;



Some lawyers have said <a href="https://blockworks.co/news/ether-etf-sec-question">issuers might look to sue the SEC</a> if they reject the planned ether products given a court decision was what ultimately helped get US spot bitcoin ETFs to start trading.



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Spot ether ETF decision week just got a bit more interesting

Daniel Cawrey

Anyone else think Ethereum is difficult to use these days?



Yeah, there’s a bunch of cool stuff on Ethereum — meme tokens, NFTs, DeFi, degens — it’s all there. But over the years as the blockchain evolved, it has become more expensive and more complicated — as in, an already complex technology for users has become even moreso.&nbsp;



Not only do users need to understand crypto basics like wallets, irreversible transactions and addresses, they also now have to contend with getting to know different chains. You can’t just send Ethereum chain ETH to Optimism chain ETH, or Optimism chain ETH to Polygon chain ETH, unless of course you use a bridge which means that this system might be getting a little complex for many users.&nbsp;



Ethereum is becoming a multilayered lasagna-like system whereby complexity and fees are pushing people to the margins, causing <a href="https://twitter.com/tonyolendo/status/1783537754179068198">interoperability</a> and security concerns.&nbsp;



<h2 class="wp-block-heading">How did we get here?</h2>



I wouldn’t say there’s anyone in particular to blame for this; it’s an ecosystem problem as a whole. When Ethereum launched almost 10 years ago, nobody was using it. At that time, any usage at all was welcomed.&nbsp;



Now, it’s 2024 and there is usage. But there’s also expensive layer-1 fees. Average transaction fees on the layer-1 Ethereum blockchain are at <a href="https://l2fees.info/">$0.94</a>. If a user wants to interact with a smart contract, like a DEX, fees are averaging <a href="https://l2fees.info/">$4.70</a>.



Some might say, “Well, maybe it’s time to examine fees themselves.” Problem is, fees are what secure the network. If validators were not being incentivized by staking and reaping fees, what would be the point?



Okay, yeah, but there’s the layer-2 options, right? There are. And Arbitrum and Optimism have both transaction and smart contract fees at less than $0.02. We’re securing the bottom layer, enabling lower fees on the second.&nbsp;



But as a <a href="https://www.coinbase.com/institutional/research-insights/research/market-intelligence/blockchain-bridges-navigating-a-fragmented-universe">Coinbase report</a> from late last year noted, there are so many of these layer-2s that fragmentation now exists between all of these different chains. And mainstream users, aka those who could enable mass adoption, want financial apps that don’t make things complicated.&nbsp;



<h2 class="wp-block-heading">The sandbox</h2>



The point is clearly that Ethereum is just one big-ass financial experiment. I actually wrote about this way back in 2016, <a href="https://www.coindesk.com/markets/2016/05/06/ethereum-a-valuable-fintech-sandbox/">about Ethereum being a fintech sandbox</a>.&nbsp;



And it has been one. When I wrote that piece, ICOs were only slowly gaining traction, DEXs were in their infancy and there wasn’t even an NFT token standard yet — just Plain Jane ERC-20s.&nbsp;



Read more from our opinion section: <a href="https://blockworks.co/news/blackrock-ethereum-memecoins-tornado-cash-dusting">BlackRock clearly wants to take crypto seriously. Too bad it’s forever silly.</a>



Times have certainly changed. Ethereum’s “world computer” concept, the idea that people could build programmable monetary systems on a verifiable blockchain, has been a success. The Ethereum Virtual Machine, or EVM, is a standard for smart contract development — even outside the Ethereum ecosystem.&nbsp;



Then, there’s the 2022 move to the proof-of-stake model, which to Ethereum’s credit, was pulled off with remarkable execution.&nbsp;



Yet I’ve heard of people working on <a href="https://www.kucoin.com/learn/crypto/layer-2-vs-layer-3-blockchains">Ethereum layer-3 projects</a> now. That’s an abstraction of two layers — can anyone come up with something comparable for so many layers in technology? Maybe <a href="https://www.cloudflare.com/learning/ddos/glossary/open-systems-interconnection-model-osi/">the OSI model</a>? It has seven layers. But it’s used for data in networking, all running at the same speed. And there’s no fees. It’s just categorizing data.&nbsp;



Okay, well, blockchains are just data. So then we arrive back at the fee conundrum. But blockchains are decentralized, so there has to be some incentive to support the network, right?&nbsp;



<h2 class="wp-block-heading">A fee quagmire</h2>



Fees secure the Ethereum network, rent the computing power to do things and also limit spam. With that in mind, I suppose there have to be fees in the system — I’m not proposing some grand, new fee-less Ethereum design, that’s for the Vitalik Buterins of the world.&nbsp;



There are rollups, and that’s promising because they can batch process transactions off of Ethereum while lowering fees with the same level of security. Or maybe some smart startup can somehow increase interoperability — instead of reducing it by having users dig through layers like a Stouffer’s Italiano.&nbsp;



I just am not convinced of the feasibility and long-term viability of so many bridges, some of which have been compromised. It feels like too many vulnerabilities in the margins. Perhaps a standardization of bridges is needed, and many wallets do warn users about interacting with bad smart contracts, so some safeguarding is happening.&nbsp;



But I’m still trying to coincide my recent experiences with Ethereum as something&#8230;&nbsp;



Very.



Lasagna-like.&nbsp;



Tasty for the taste buds as a food, yes.&nbsp;



But isn’t it a bit complex for people to use as a blockchain? People want apps that offer free flow of money, not restrictive layers. Hopefully, Ethereum can evolve past this lasagna stage.



<hr class="wp-block-separator has-alpha-channel-opacity"/>


<div class="wp-block-post-author-biography">Daniel Cawrey has been involved full-time in the crypto space since 2013, including as an editor at CoinDesk. He is author of 2020’s “Mastering Blockchain” and 2023’s “Understanding Crypto” books, both available on Amazon.</div>


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Ethereum is too hard to use

Industry watchers seem to agree that if US regulators approve spot ether ETFs, it would be a bullish development for the asset. What&#8217;s more, they believe that even if these ETFs are not approved, the impact on the market will not be significantly negative.



That is in part due to market participants’ low expectations that the Securities and Exchange Commission will approve such funds this time around.&nbsp;



The SEC has until May 23 to rule on a proposed ETH fund by VanEck. Its deadline for a similar planned offering from Ark Invest and 21Shares is the next day.



Segment observers expect, like with bitcoin ETFs, that the securities regulator will rule on all the ETH fund applications at once.&nbsp;&nbsp;&nbsp;



Ether’s price was about $3,140 at 2:30 pm ET Monday — up about 7% from a week ago but a far cry from its year-to-date high above $4,000 in mid-March.



A spot ether ETF approval decision would spur immediate price appreciation and a medium-term new all-time high above $4,800, according to Jeff Embry, managing partner of crypto hedge fund Globe 3 Capital.



“The difference between the bitcoin [ETF] approval and ETH’s possible approval, is that the market had fully expected the bitcoin approval and had pre-priced it, thus causing an initial sell off on the news,” Embry told Blockworks.



Contrarily, various industry watchers have said they <a href="https://blockworks.co/news/ether-etf-approval-unlikely-soon">expect the SEC to deny ether ETFs this month</a>.&nbsp;



Reasons include the SEC’s hesitation to clearly label ether as a security or a commodity, the regulator’s lack of engagement with prospective issuers in recent weeks and the slightly weaker correlation between the ether spot and futures markets compared to bitcoin.



It also took Grayscale Investments’ legal victory against the SEC to help get US spot bitcoin ETFs approved — something some lawyers said <a href="https://blockworks.co/news/ether-etf-sec-question">might be needed before ether funds get the green light</a>.&nbsp;



Read more: <a href="https://blockworks.co/news/sec-decision-ether-etf-possibilities">Why the SEC could choose to deny ether ETFs, and what could happen next</a>



The expected SEC rejection of spot ether ETFs is reflected in ETH’s roughly 20% price dip since mid-March, Embry noted.



“If the SEC denies the ETH ETF, we would expect to see an initial sell off of 5% to 12%, but short lived, as the bull market is a much more powerful driver of pricing and will ultimately move pricing up,” the executive added.



Indeed, the approval of an Ethereum ETF next week is viewed as a low probability event, and ether is priced as such, said LMAX Group market strategist Joel Kruger.



There might be room for ETH to drop lower in the case of a denial — though such a downtrend should not exceed 10%, he added.&nbsp;&nbsp;



“If on the other hand the market is surprised with an approval, we could see the price of ETH surge by some 30% in the immediate aftermath,” Kruger said, “with such a move setting the stage for a run to retest the 2021 record high in the weeks that follow.”



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Is the SEC’s expected spot ether ETF denial priced in?

The House of Representatives is scheduled to vote on a landmark cryptocurrency market structure bill this week.&nbsp;



The Financial Innovation and Technology for the 21st Century <a href="https://www.congress.gov/bill/118th-congress/house-bill/4763?q=%7B%22search%22%3A%5B%22Financial+Innovation+and+Technology+for+the+21st+Century+Act.%22%5D%7D&amp;s=1&amp;r=1">Act</a>, known as the FIT21 Act, is expected to head to the floor for a vote in the House on May 22, according to a person familiar with the matter.&nbsp;



FIT21 advanced through the House Agriculture and Financial Services Committees last summer before getting the greenlight from the Rules Committee to advance to a vote earlier this month. The bipartisan legislation has 11 co-sponsors, including Democrats Henry Cuellar of Texas, Wiley Nickel of North Carolina and Ritchie Torres of New York.&nbsp;



The proposed market structure law establishes joint rulemaking powers between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Notably, the bill grants the latter control over digital commodities markets, including exchanges and broker-dealers.&nbsp;



The legislation also clarifies how digital assets are classified, stating that the existence of an investment contract alone does not make a token a security, a distinction that could impact several pending legal disputes between token issuers and crypto exchanges and the SEC.&nbsp;



About 70% of all crypto tokens should be classified as commodities rather than securities, the co-sponsors wrote in a <a href="https://agriculture.house.gov/uploadedfiles/market_structure_myth_v_fact.pdf">fact sheet</a> published alongside the bill.&nbsp;



While FIT21 managed to survive markup, there has been pushback from some House Democrats, who argue the legislation goes too far to limit SEC power.&nbsp;



Rep. Jonathan Jackson, D-Ill., last summer proposed an amendment — which never passed — to strike a section of the bill that allows firms who have filed a “notice of intent to register” to be exempt from certain enforcement actions from the SEC.&nbsp;



“Allowing for ‘intent to register’ before those regulations are completed would be an absolute injustice to our constituents and retail investors,” Jackson said. “This industry needs to be under full-force regulation and oversight.”&nbsp;



Agriculture Committee Chair Glenn Thompson, R-Penn., countered that the “notice of intent” allows firms who meet requirements for treatment of customer funds, disclosures and records to operate limitedly while the potentially years-long registration approval process plays out. The bill also allows the Commodity and Futures Trading Commission to issue enforcement actions against firms who have completed the “notice of intent” process.&nbsp;



The Republican majority in the House however, coupled with the expected support of at least some Democrats, mean the bill is likely to pass and make it to the Senate, where its fate is less clear.&nbsp;



The expected House vote comes days after the <a href="https://blockworks.co/news/senate-passes-resolution-to-overturn-sab121">US Senate passed another crypto-focused</a> piece of legislation Thursday: Joint Resolution 109, which seeks to invalidate the SEC’s Staff Accounting Bulletin (SAB) 121. 



The resolution now heads to the President’s desk. The Biden Administration <a href="https://www.whitehouse.gov/wp-content/uploads/2024/05/SAP-HJRes109.pdf">said</a> earlier this month the President will veto the legislation.



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House expected to vote on bipartisan crypto market structure bill Wednesday

New York Attorney General Letitia James said Genesis and the attorney general’s office will create a “Victims Fund” for creditors of Genesis.&nbsp;



The fund will receive “up to $2 billion” from the remaining assets of Genesis.



“If those creditors are not made whole based on today’s digital asset values, the Victims’ Fund will receive up to $2 billion from Genesis’ remaining assets,” the press release <a href="https://ag.ny.gov/press-release/2024/attorney-general-james-secures-settlement-worth-2-billion-crypto-firm-genesis">said</a>.&nbsp;



The settlement was approved by a bankruptcy judge late Friday after being challenged by parent company Digital Currency Group earlier this year.&nbsp;



Genesis and the NYAG originally <a href="https://blockworks.co/news/genesis-settles-new-york-attorney-general">announced the settlement </a>back in February.&nbsp;



Read more: <a href="https://blockworks.co/news/bankruptcy-court-dcg-out-of-money">Bankruptcy court says DCG is ‘out of the money’</a>



As part of the settlement, Genesis agreed to cease current business offerings in New York and is prohibited from future business in the state.



According to a press release, the settlement is the “largest against a cryptocurrency company in state history.”



“This historic settlement is a major step toward ensuring the victims who invested in Genesis have a semblance of justice. Once again, we see the real-world consequences and detrimental losses that can happen because of a lack of oversight and regulation within the cryptocurrency industry. New York investors deserve the peace of mind that comes from a properly regulated marketplace, and that is something my office will always act to achieve,” James said in a press release.&nbsp;



The NYAG <a href="https://blockworks.co/news/genesis-gemini-nyag-lawsuit">sued DCG, Gemini and Genesis</a> in October of last year, alleging that Gemini and Genesis coordinated on two “fraudulent schemes” with the Gemini Earn product.&nbsp;



DCG allegedly “coordinated” with the two companies, per the lawsuit.&nbsp;



The settlement announcement puts Genesis a step closer to finalizing its bankruptcy proceedings after a judge approved its liquidation plan at the same time as the settlement on Friday.



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NYAG says Genesis settlement to pay back creditors up to $2B

Spot bitcoin ETFs saw their best inflow week in two months as a consumer price index report last week seemed to ease concerns weighing the asset down.



The US fund category collectively notched $948 million in positive net flows from May 13 to May 17, according to Farside Investors <a href="https://farside.co.uk/?p=997">data</a>.&nbsp;&nbsp;



This was the highest total during a single week since the fund segment welcomed more than $2.5 billion to its coffers between March 11 and March 15.



Analysts attributed the subsequent drying up of demand in April to profit-taking and the Federal Reserve’s anticipated higher-rates-for-longer approach.&nbsp;&nbsp;



Read more: <a href="https://blockworks.co/news/bitcoin-etf-performance-first-four-months">Strong start, slowing demand: The first 4 months of US spot bitcoin ETFs&nbsp; </a>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;



But April’s consumer price index (CPI) print, published Wednesday, came in cooler than expected at 0.3% month-on-month, according to Ryze Labs analysts — compared to the market expectation of 0.4%.



“This has quelled rumors of a potential rate hike and paves the way for [Fed Chair Jerome] Powell to consider a rate cut in the coming months,” the analysts wrote.&nbsp;



Rate expectations had been one factor seeming to weigh down bitcoin’s price in recent weeks. The cost of one <a href="https://blockworks.co/price/btc">BTC</a> dropped to as low as about $57,000 on May 1 following its new all-time high of more than $73,000 reached in mid-March.  



<a href="https://blockworks.co/news/crypto-rallies-on-interest-rate-speculation">Bitcoin’s price rose to around $67,000 on Friday</a> and remained around that level on Monday morning.&nbsp;



James Butterfill, head of research at CoinShares, noted the vast majority of the inflows (more than 80%) came in the week’s final three days after the CPI print. This highlights the company’s view that BTC prices “have recoupled to interest rate expectations,” he wrote in a Monday <a href="https://blog.coinshares.com/volume-183-digital-asset-fund-flows-weekly-report-21f5ffa273a5">report</a>.



The $948 million of net inflows into spot bitcoin ETFs nearly equaled the net money exiting the funds over the previous last five weeks. From April 8 to May 10, the category endured net outflows of $931 million, Farside Investors data shows.



Notably, it was the first week of net inflows — albeit just barely — <a href="https://blockworks.co/news/gbtc-posts-first-net-inflows">for the Grayscale Bitcoin Trust ETF</a> (GBTC).&nbsp;



That fund’s $17.6 billion of net outflows over the last four-plus months have weighed down the segment, which has now hit about $12.6 billion of combined positive net flows.



The inflows came during a week in which more institutional investors revealed their holdings in such funds. The Securities and Exchange Commission requires institutional investment managers to disclose their holdings quarterly in what are known as 13F filings.&nbsp;



Segment observers have recently found out, via the disclosures, that Wisconsin’s Investment Board <a href="https://blockworks.co/news/wisconsin-discloses-blackrock-ibit-shares">bought 2.4 million shares</a> of BlackRock’s iShares Bitcoin Trust (IBIT) and over a million shares of GBTC. Hedge fund <a href="https://blockworks.co/news/empire-newsletter-bitcoin-etf-shareholders">Millennium Management revealed owning about 20 million IBIT shares</a> worth more than $844 million.



Read more: <a href="https://blockworks.co/news/advisers-bitcoin-etfs-client-portfolios">How are advisers using bitcoin ETFs in client portfolios? It depends.</a>



In all, the 13Fs <a href="https://x.com/EricBalchunas/status/1791079436953022885">showed</a> that more than 400 institutional investors hold IBIT.&nbsp;



The disclosures reflect the institutional participation that bitcoin ETFs had expected to unlock, noted Anchorage Digital CEO Nathan McCauley.&nbsp;



“From hedge funds and endowments, to governments and pension funds, traditional players are driving hundreds of millions of dollars in ETF inflows,” McCauley added in a statement. “As bitcoin liquidity increases, expect more institutions to participate in crypto through safe and secure infrastructure.”



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Bitcoin ETF snapshot: Week’s inflows hit highest mark since March

Michael Sonnenshein has stepped down as CEO of Grayscale Investments.&nbsp;



The Wall Street Journal first <a href="https://www.wsj.com/finance/grayscale-ceo-michael-sonnenshein-steps-down-bc0680dc?mod=latest_headlines">reported</a> the news Monday, saying that Grayscale will bring in a Goldman Sachs alum as the new CEO in August. A Grayscale spokesperson confirmed the news when reached.&nbsp;



“Peter is an exceptional strategic leader with global expertise across the most prominent asset managers, which are critical ingredients as we position Grayscale for its next phase of growth,” Digital Currency Group CEO Barry Silbert said in a <a href="https://www.globenewswire.com/news-release/2024/05/20/2884901/0/en/Grayscale-Investments-Announces-CEO-Transition.html">statement</a>.



Peter Mintzberg served as the head of strategy for the asset management division at Goldman and also worked at BlackRock and Invesco.&nbsp;



In a post on X, Sonnenshein said that he leaves Grayscale with “a deep gratitude” and said he’s “excited for what’s next.” Though it’s unclear what’s in store for the former executive at this stage.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">I leave <a href="https://twitter.com/Grayscale?ref_src=twsrc%5Etfw">@Grayscale</a> with deep gratitude for everyone who has been on this incredible rocket ship journey. <a href="https://twitter.com/BarrySilbert?ref_src=twsrc%5Etfw">@BarrySilbert</a>, thank you for taking a bet on me and for your partnership these last 10 years. To the Grayscale Leadership Team &#8211; thank you for your dedication, loyalty, and…&mdash; Sonnenshein (@Sonnenshein) <a href="https://twitter.com/Sonnenshein/status/1792547074707181610?ref_src=twsrc%5Etfw">May 20, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The change comes the same week as an expected decision on the ether ETF application. Grayscale filed to convert its ether trust into an ETF last year.



Analysts <a href="https://blockworks.co/news/sec-decision-ether-etf-possibilities">expect the SEC to deny the ether ETFs</a> later this week. Grayscale withdrew its ether futures ET application earlier this month.&nbsp;



During a Financial Times event earlier this month, Sonnenshein <a href="https://www.dlnews.com/articles/regulation/grayscale-to-focus-on-spot-ethereum-products-says-ceo/">reportedly</a> said that the firm wants to focus on its spot products.



Read more: <a href="https://blockworks.co/news/grayscale-takes-page-from-blackrock-playbook">Grayscale’s planned GBTC sibling is a page from BlackRock’s playbook</a>



The exit also comes as Grayscale’s bitcoin ETF continues to see outflows. GBTC has the highest fee of the slate of spot bitcoin ETFs approved in January, at 1.5%.  BlackRock has seen significant success in the same period of time.



However, the firm <a href="https://blog.coinshares.com/volume-183-digital-asset-fund-flows-weekly-report-21f5ffa273a5">notched</a> inflows of $18 million last week, according to a CoinShares report from Monday morning.



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Grayscale CEO Michael Sonnenshein departs company

Michael McSweeney

<h2 class="wp-block-heading">Is a battle brewing?</h2>



I hope y’all had a better weekend than Digital Currency Group and CEO Barry Silbert.



Late Friday, Judge Sean Lane ruled against DCG’s objection to a settlement between the New York Attorney General’s office and bankrupt lender Genesis.&nbsp;



“Given the size of the creditor claims, DCG is out of the money as an equity holder by billions of dollars, even if the Court valued creditor claims using the method DCG proposes,” the judge wrote Friday.



The judge also ruled to confirm the liquidation plan proposed by Genesis.



For those of you who haven’t been following along with this bankruptcy (and there are many moving pieces with this one), DCG wasn’t super happy with the bankruptcy plan or settlement proposed by the Genesis estate.&nbsp;



The crypto company called the settlement agreement “subversive,” and said that the settlement was a “back-door attempt to circumvent US bankruptcy law.” Though, clearly, the judge overseeing the case doesn’t agree.



The settlement plans to return assets to customers of Gemini’s Earn program and other creditors instead of government authorities.



The bankruptcy plan, DCG said, favored a “small controlling group of creditors” and stripped the company of “valuable economic and corporate governance rights.”



The plan would return roughly $3 billion in cash and assets to customers.



Lane, in the Friday ruling, essentially said “too bad” to these claims. Perhaps more importantly, DCG is just out of the money in this case.



“In overruling DCG’s objection, the Court ultimately concludes that its objection is a result oriented one based on DCG’s lack of recovery as an equity holder under the Plan,” he wrote. “There are nowhere near enough assets to provide any recovery to DCG in these cases.”



Despite its arguments to the contrary, DCG was unable to convince the court that the NYAG settlement wasn’t “reasonable and appropriate.”



As for the claim that the plan “favors” a small group of creditors? “DCG cannot complain that unsecured creditors are being paid before equity, as such creditors are entitled to be paid before equity may receive any recovery,” Lane wrote.



DCG and Genesis have exchanged objections throughout the first half of this year. The Friday filing also marked yet another defeat for DCG, which had also sought to consult on the offloading of over $1.6 billion worth of Grayscale’s bitcoin ETF earlier this year.&nbsp;



During a hearing in February, Lane said that the firm was “not in an ideal position” to offer “advice tainted by its own interest,” though he added that he couldn’t blame the company for said interest.



Now, putting the drama aside and focusing back on the bankruptcy plan: The boom in crypto prices will benefit creditors with claims in US dollars because they’re anticipated to receive “100% of their loan balance,” according to the filing.



But creditors can also be paid out in crypto as well, unlike other bankruptcies such as FTX.



The rise in crypto prices increased the estate asset value by $1 billion, Lane wrote. A February testimony confirmed that there was an “an additional $900.5 million available for in-kind distribution.”



But the Friday filing doesn’t mean that everything can proceed. DCG can still appeal the decision from Lane. Based on the back and forth we’ve seen, it wouldn’t be a surprise if they did.



— Katherine Ross



<h2 class="wp-block-heading">Data Center</h2>



<ul>
<li>Bitcoin’s price is hovering around $67,000, up nearly 7% over the past week.</li>



<li>Ether is trailing slightly behind, only up 4% in the past week to $3,000.</li>



<li>CoinShares <a href="https://blog.coinshares.com/volume-183-digital-asset-fund-flows-weekly-report-21f5ffa273a5">says</a> that bitcoin drew $942 million worth of inflows with little to no flows into short bitcoin last week.</li>



<li>The same report says crypto investment products received inflows of $932 million following last week’s CPI report. </li>



<li>Grayscale saw “minor inflows” of $18 million for the first time, the report added.</li>
</ul>



<h2 class="wp-block-heading">More votes to come</h2>



The US Congress drew headlines last week as it moved crypto-friendly regulation to completion —&nbsp;and the chamber may do it again in the coming days.



As Blockworks’ Casey Wagner reports, <a href="https://blockworks.co/news/crypto-bills-in-house-and-senate">a number of pieces</a> of crypto-related law remain in flux. But one measure, the Financial Innovation and Technology for the 21st Century (FIT) Act, is set for a floor vote this week.



After clearing the Rules Committee, which sets the stage for final consideration, the measure is likely on the track to success. The real outstanding question here is whether the measure will attract the kind of bipartisan support that might smooth the landing in the Senate, Congress’s upper chamber.&nbsp;



Remember: 21 Democrats crossed the aisle to pass Congress’ repudiation of SAB 121. This arguably set the stage for the dozen Democrats who passed the Senate version despite opposition from President Joe Biden —&nbsp;who threatened a veto —&nbsp;and Massachusetts Senator Elizabeth Warren, a leading anti-crypto voice in the chamber.&nbsp;



As expected, the industry came out in force in favor of the FIT Act. <a href="https://media.cryptoforinnovation.org/2024/05/Coalition-Support-Letter_May-16.pdf">A letter</a> issued Friday represented a who’s-who of industry groups and companies active in Washington, DC.&nbsp;



The groups have an obvious incentive to throw their weight behind the measure. The bill mandates a crypto regulatory framework under the shared auspices of the CFTC and the SEC and one that calls for regulators, among other things, to <a href="https://thehill.com/opinion/finance/4279809-congress-may-modernize-the-secs-mission-will-it-work/">consider innovation</a> as they oversee a burgeoning tech sector.&nbsp;



It’s arguably the best shot at passing industry-shaping legislation before the election season heats up, even if the bill isn’t perfect in the eyes of some.



“We recognize that FIT 21 will introduce new compliance challenges for digital assets companies, but regulatory clarity is indisputably more responsible, safer for consumers, and preferable to the status quo,” the signatories noted.&nbsp;



A new Congress takes over in January, resetting the legislative calendar, meaning that in-progress bills would need to be refiled —&nbsp;and all that momentum regained.



It’s not certain that the Senate would take up an approved House bill —&nbsp;with or without demanded changes —&nbsp;or that Biden would sign it. But last week’s rapid approval of the SAB 121 overturn was, in many ways, a remarkable one, and a sign that crypto issues are being taken seriously. Stay tuned.



— Michael McSweeney



<h2 class="wp-block-heading">The Works</h2>



<ul>
<li>The Pump.fun exploiter was arrested over the weekend in London, as reported by <a href="https://blockworks.co/news/pump-dot-fun-exploiter-arrest-london">Blockworks’ Macauley Peterson</a>. </li>



<li>Ethereum Foundation researcher Justin Drake is serving <a href="https://x.com/drakefjustin/status/1792143477163106787">as an adviser</a> to the Eigen Foundation, according to a disclosure Drake posted this weekend. </li>



<li>Speaking of Ethereum: Co-founder Vitalik Buterin dug into decentralization issues on the network in <a href="https://vitalik.eth.limo/general/2024/05/17/decentralization.html">a new blog post</a>. </li>



<li>Reuters reports that crypto VC activity <a href="https://www.reuters.com/business/venture-capital-investment-crypto-picks-up-after-long-decline-2024-05-20/">picked up</a> during the first few months of 2024. </li>



<li>Longtime crypto trader Cobie <a href="https://cobie.substack.com/p/new-launches-part-1-private-capture">published a piece</a> on new token launches and valuations over the weekend. </li>
</ul>



<h2 class="wp-block-heading">The Morning Riff</h2>



Based on the eras in which they reached popularity, you’d think that Seinfeld and crypto would have nothing in common (though I truly believe that Kramer would be super into crypto).



Boy, am I glad to tell you that’s not the case.



On Friday, the New York office of the DOJ put out a press release announcing that a “cryptocurrency personality” pleaded guilty to wire fraud.&nbsp;



As it turns out, Thomas Sfraga — aka TJ Stone — swindled folks out of roughly $1.3 million. The Seinfeld connection? He claimed to be the owner of Vandelay Contracting. For those of you who haven’t watched Seinfeld, one of the main characters, George Costanza, claimed to interview at Vandelay Industries and elsewhere <a href="https://www.youtube.com/watch?v=Ugx06TlVyw4">used Art Vandelay</a> as a fake name.&nbsp;



Obviously, the crimes are no joke and Sfraga’s guilty plea proves it. It also shows that crypto always has some wiggle room for humor.&nbsp;



But maybe next time, go for a reference that isn’t from a storyline where the character is attempting fraud? Just a thought. (And, for the record: not advice of any kind!)



— Katherine Ross



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Empire Newsletter: Bankruptcy court says DCG is ‘out of the money’

This week’s funding was led by the betting platform Polymarket, which disclosed a whopping $70 million raised from two separate rounds.&nbsp;



The announcement was slightly unusual in that it revealed its Series B raise while also revealing a previously undisclosed Series A round.



The Series A — which raised $25 million — was led by General Catalyst, with Airbnb’s Joe Gebbia and Polychain also participating.



The Series B raised $45 million, and saw participation from <a href="https://blockworks.co/tag/vitalik-buterin">Vitalik Buterin</a>, the co-founder of Ethereum (like he needs an introduction at this point though), with Founders Fund leading the round.&nbsp;



Read more from our opinion section: <a href="https://blockworks.co/news/polymarket-titanic-betting-prediction">Gambling on the Titanic sub sucks, but leave moral outrage in Web2</a>



In the announcement, which took place earlier this week, Founders Fund partner Joey Krug offered an inside scoop on his company’s interest in the prediction market platform.



“Internally at Founders Fund, we developed a habit of checking Polymarket at times of breaking news. The tangible benefits of using Polymarket as a complement to consuming news on social and mainstream media was obvious. It became clear to us that Polymarket was the winner in this market,” he <a href="https://www.businesswire.com/news/home/20240513090515/en/Polymarket-Raises-70m-From-Thiel%E2%80%99s-Founders-Fund-General-Catalyst-Vitalik-Buterin-to-Scale-Global-Prediction-Market">said</a>.



Trading on Polymarket is prohibited in the US, though anyone can view the forecasts. But the funding announcement does come as the Commodities and Futures Trading Commission <a href="https://www.reuters.com/markets/us/us-cftc-seeks-ban-derivatives-bets-elections-calamities-2024-05-10/">proposed</a> a new rule to ban derivatives on election bets (and potentially other events).&nbsp;



Polymarket does currently allow people to place bets on potential winners of the presidential election. Currently, former President Donald Trump has the <a href="https://polymarket.com/event/presidential-election-winner-2024?tid=1715974683376">lead</a> with 51%. President Joe Biden is a close second at 42%. Roughly $127 million has been placed on potential election winners.



Read more: <a href="https://blockworks.co/news/cftc-fines-crypto-betting-service-polymarket-1-4-million-orders-shutdown">CFTC fines crypto betting service Polymarket $1.4M, orders shutdown of three markets</a>



<h2 class="wp-block-heading">In the distance, a unicorn earns its horn</h2>



Decentralized identity project Humanity Protocol announced a $30 million seed round led by Kingsway Capital. The <a href="https://blockworks.co/tag/worldcoin">Worldcoin</a> competitor, which uses palm recognition technology instead of iris-scanning software, <a href="https://medium.com/@humanityprot/humanity-protocol-emerges-from-stealth-human-institute-in-collaboration-with-animoca-brands-and-d74b8757e44e">emerged</a> from stealth back in February.&nbsp;



The round, <a href="https://medium.com/@humanityprot/humanity-protocol-raises-30m-at-a-1-billion-valuation-to-build-zero-knowledge-worldcoin-fdf79ad2192e">announced</a> Wednesday, saw participation from Animoca Brands, Blockchain.com, Hashed and Shima Capital, among others.&nbsp;



Humanity Protocol previously <a href="https://medium.com/@humanityprot/humanity-protocol-announces-strategic-funding-to-build-the-human-layer-for-web3-492f111c1be2">announced</a> a fundraising round, saying that it received funds from 20 crypto native venture capitalists.&nbsp;



The raise puts the protocol’s valuation at $1 billion, officially making it a crypto unicorn.&nbsp;



“As an advocate for true digital property rights, I’m very passionate about ensuring that users’ digital identities remain secure and protected. Traditional proof-of-personhood methods often <a href="https://blockworks.co/news/families-like-mine-need-safe-secure-digital-identities">come with drawbacks</a>, whether they’re too invasive, complicated or cumbersome,” Animoca Brands co-founder Yat Siu said in a statement.



<h2 class="wp-block-heading">Other notable funding news</h2>



<ul>
<li>Subquid raised $17.5 million in “recent rounds” that included investments from Hypersphere, Zee Prime, CFG, Lattice and Blockchange.</li>



<li>Param Labs, a gaming platform, raised $7 million round in a round led by Animoca Brands. Delphi Ventures and Cypher Labs participated in the round. </li>



<li>Zeta Market <a href="https://x.com/ZetaMarkets/status/1790352191741378949">announced</a> a $5 million round led by Electric Capital.</li>
</ul>



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Funding Wrap: Polymarket gets backing from Vitalik Buterin, Founders Fund in $70M raise

Two crypto companies named new CEOs this week. What some would consider an anti-crypto firm did too.



Vijay Chetty replaced Neel Somani as Eclipse Labs’ chief executive, the company <a href="https://x.com/EclipseFND/status/1790939437695996019">said</a> in a Wednesday X post.



Chetty had been the blockchain startup’s chief growth officer for the last year or so. He previously held leadership roles at Uniswap Labs, dYdX Trading and Ripple Labs.



His promotion came after sexual misconduct allegations surfaced against Somani — claims the now-former CEO <a href="https://x.com/neelsalami/status/1788658998411133067">called</a> “false.”



Hack VC, which co-led a $50 million Series A funding round for Eclipse Labs in March, said Somani’s alleged behavior was “unacceptable.”



Read more: <a href="https://blockworks.co/news/eclipse-series-a-funding-mainnet-launch">Eclipse secures $50M ahead of mainnet launch</a>



“Since learning about the allegations, we [have] worked hard with other investors and the team to correct the situation, including urging Neel to resign, and we are pleased to see that happen,” Hack VC added.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">We were deeply troubled to learn about the serious allegations made recently against <a href="https://twitter.com/EclipseFND?ref_src=twsrc%5Etfw">@EclipseFND</a> founder Neel Somani. We do not tolerate sexual harassment or misconduct in any form at Hack VC, and we hold our founders and portfolio companies to the same high standards. To be… <a href="https://t.co/2g5P7Bjqq3">https://t.co/2g5P7Bjqq3</a>&mdash; Hack VC (@hack_vc) <a href="https://twitter.com/hack_vc/status/1790942270977675733?ref_src=twsrc%5Etfw">May 16, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



A second CEO development this week is a temporary appointment.&nbsp;



Bitcoin miner Bitfarms on Monday named co-founder Nicolas Bonta the company’s interim president and CEO while an executive search continues. The switch happened the same day that Bitfarms ousted Geoffrey Morphy from the CEO post.



The <a href="https://blockworks.co/tag/mining">mining</a> company had said in March that Morphy would be leaving the role only after his replacement was found. That transition was accelerated after Morphy last week filed a statement of claim against Bitfarms in the Superior Court of Ontario.



Morphy is claiming $27 million worth of damages for alleged breach of contract and wrongful dismissal. Bitfarms said the claims are “without merit,” noting the company “intends to defend itself vigorously.”&nbsp;



A third CEO update came from a company nobody would call crypto-focused.&nbsp;



<a href="https://blockworks.co/tag/vanguard">Vanguard</a>, a fund giant with more than $8 trillion assets under management, named the former head of BlackRock’s ETF business as its incoming CEO. Salim Ramji will fill the role in July, replacing the retiring Tim Buckley.&nbsp;&nbsp;



Why might this be notable from a crypto standpoint?



Well, Ramji helped the world’s largest asset manager launch the iShares Bitcoin Trust (IBIT) — a fund that, in four months on the market, has grown to roughly $18 billion in assets.&nbsp;



BlackRock’s spot bitcoin fund launch reflected an effort to “help investors gain access to parts of the market that otherwise have been more difficult or really expensive or opaque for them to access otherwise,” Ramji said in a July 2023 interview on Bloomberg TV.&nbsp;



Read more: <a href="https://blockworks.co/news/vanguard-ceo-blackrock-bitcoin-etf">Yes, Vanguard’s new CEO supported BlackRock’s bitcoin ETF launch</a>



He now leads a company that has called crypto’s investment case “weak.” <a href="https://blockworks.co/news/vanguard-disallows-bitcoin-etf-trading">Vanguard also does not allow users</a> of its brokerage platform to buy and trade <a href="https://blockworks.co/tag/bitcoin-etf">bitcoin ETFs</a>.&nbsp;&nbsp;



Some expect the hire could spark a change in Vanguard’s attitude toward the space, even if gradual.



Ramji <a href="https://www.barrons.com/articles/vanguard-salim-ramji-strategy-7283a283?mod=bol-social-tw">signaled</a> in an interview with Barron’s this week that he may not push a change, noting “it’s important for firms to have consistency in terms of what they stand for and the products and services they offer.”



But never say never, as the adage goes.



“Eventually…Vanguard will indeed offer bitcoin ETFs,” Ric Edelman, founder of the Digital Assets Council of Financial Professionals, told Blockworks. “From a purely business perspective, it’s foolish not to. And Salim is not foolish.”



<h2 class="wp-block-heading">Other notable hiring news</h2>



<ul>
<li>Jack Melnick, who left Polygon Labs last week, <a href="https://x.com/jackmelnick_/status/1790003409531093413">joined</a> layer-1 Berachain. His title — head of DeFi — remained the same.    </li>



<li>Luc Froehlich, who formerly led the digital assets unit at Fidelity International, is now chief commercial officer of decentralized credit intelligence platform Synnax.</li>



<li>Ava Labs marketing executive Jay Kurahashi-Sofue <a href="https://x.com/jayks/status/1791483711566880986">said</a> Friday he would be leaving the company after four years there. His next role was not immediately clear.  </li>



<li>Noah Levine is set to help lead Visa’s on-chain analytics efforts as a crypto analyst. He was previously a data and analytics lead at RTFKT.</li>



<li>Crypto-focused lawyers Lewis Rinaudo Cohen, Gregory Strong and Sarah Chen joined Cahill Gordon &amp; Reindel as partners of its digital assets and emerging technology practice.</li>
</ul>



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